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TI Fluid Systems plc (LON:TIFS) is about to trade ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 15th of August will not receive the dividend, which will be paid on the 27th of September.
TI Fluid Systems's next dividend payment will be €0.03 per share, and in the last 12 months, the company paid a total of €0.12 per share. Based on the last year's worth of payments, TI Fluid Systems stock has a trailing yield of around 6.6% on the current share price of £1.664. If you buy this business for its dividend, you should have an idea of whether TI Fluid Systems's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for TI Fluid Systems
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see TI Fluid Systems paying out a modest 38% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 32% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that TI Fluid Systems's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, it's good to see earnings have grown 17% on last year. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
One year is not very long in the grand scheme of things though, so we wouldn't draw too strong a conclusion based on these results.